United States District Court, D. Maryland, Southern Division
KRISTEN H. POTTS, Plaintiff,
MARYLAND GAMES, LLC, Defendant.
Charles B. Day United States Magistrate Judge.
the Court is Plaintiff's Motion for Mandatory Preliminary
Injunction (“Plaintiff's Motion”)(ECF No.
30). The Court has reviewed Plaintiff's Motion and the
opposition and reply thereto. No. hearing is deemed
necessary. Local Rule 105.6 (D. Md.). For the reasons set
forth below, the Court GRANTS Plaintiff's Motion.
operative documents that are before the Court without dispute
are the following: 1) a Promissory Note (the
“Note”) negotiated between Technology Exclusive,
Inc. (“TE”) and Plaintiff; 2) a Security
Agreement between TE and Plaintiff; and 3) a UCC Financing
Statement (the “UCC Filing”) filed in the State
of Nevada, which happens to be the state of TE's Articles
of Incorporation. The UCC Filing identifies TE as the debtor
and Plaintiff as the secured party. The execution of each of
these documents preceded TE's involvement with Defendant.
about September 14, 2017, TE and Defendant executed an Asset
Purchase Agreement (the “APA”) for the sale of
all of TE's assets to Defendant. In October 2018,
Plaintiff issued notices of default to TE with respect to the
Note and Security Agreement. As a result of the alleged
default, Plaintiff invoked the authority to take possession
of all collateral identified in the Security Agreement.
Plaintiff contends that said collateral includes, but is not
limited to, video lottery games. The Note reflects that
Plaintiff is entitled to damages, presently estimated to be
more than $1.5 million, from TE as a result of default.
Through it all, Defendant asserts a lack of previous
knowledge of the existence of the Note, the Security
Agreement, or the UCC Filing between Plaintiff and TE.
Plaintiff's Motion for Preliminary Injunction.
heart of Plaintiff's Motion is her significant concern
regarding her ability to collect on any judgment that she
hopes to obtain as a result TE's default. Pursuant to a
provision in the Security Agreement, Plaintiff's
prosecution of TE is being waged in arbitration. In her
effort to recover the collateral posted by TE, Plaintiff
brings the present suit against Defendant.
light of the funding sources leading to the recent corporate
creation of Defendant, Plaintiff opines that Defendant is not
adequately capitalized. Plaintiff believes that obtaining a
judgment against Defendant is likely to be worthless if the
ordinary processes of litigation remain unchanged. Plaintiff
therefore seeks injunctive relief in an effort to maintain
the status quo regarding the video lottery games and the
revenues generated by them, which are currently being
operated by Defendant. Said lottery games are reportedly in
the possession of: 1) Chesapeake Amusements, Inc. d/b/a/
Chesapeake Beach Resort and Spa's Rod ‘N' Reel
Restaurant; and 2) Eagle Amusements, Inc. d/b/a/ Trader's
Seafood, Steak and Ale Restaurant. Plaintiff's request
for injunctive relieve seeks to require Defendant to deposit
with the Court, or alternatively with Defendant's
counsel's trust account, certain revenues from the gaming
machines and contracts.
single issue before the Court is whether Plaintiff can
satisfy the standard necessary to obtain a preliminary
injunction. Guidance is provided by DiBiase v. SPX
Corp., 872 F.3d 224 (4th Cir. 2017). As
stated therein, “a preliminary injunction is an
extraordinary remedy intended to protect the status quo and
prevent irreparable harm during the pendency of a
lawsuit.” Id. at 230. In order to prevail,
Plaintiff must show that she is likely to succeed on the
merits, likely to suffer irreparable harm without injunctive
relief, that the balance of equities tip in her favor, and
that the relief is in the public interest. Id. The
Court is persuaded that Plaintiff has met her burden.
Success on the merits.
essence of Plaintiff's claims sound in the law of
conversion. Conversion is the intentional tort of exercising
ownership or dominion over the property of another
inconsistent with that person's right of ownership.
Nickens v. Mount Vernon Realty Grp., LLC, 429 Md.
59, 54 A.3d 742 (2012). Under Maryland law, Plaintiff must
show that Defendant, without authority or permission,
physically interfered with Plaintiff's use or enjoyment
of the gaming machines. To establish her claim, Plaintiff
must show the superior right to possess or enjoy said
Maryland law, if Plaintiff has a valid Security Agreement,
her interest in the collateral identified therein continues
despite the sale under the APA to Defendant. “A
security interest . . . continues in collateral
notwithstanding sale . . . or other disposition thereof
unless the secured party authorized the disposition free of
the security interest . . . .” Md. Code Ann. Com. Law
9-3-15(1)(LexisNexis 1999). Plaintiff is not seeking injunctive relief
regarding the disposition of collateral, as it appears that
the gaming machines are actively in service. There are simply
no “proceeds” to attach.
the claim for conversion, Defendant's arguments are
limited to notions of acting in “good faith.”
Specifically, Defendant asserts the lack of actual knowledge
of the security interest as well as the purchase of the
assets for fair value. Defendant apparently took great pains
to obtain representations from TE that it was authorized to
execute the APA without encumbrance. ...